How Many Credit Cards Should I Have?

Some households manage with 1 or 2 credit cards, others have several, and some households have none at all.

Each credit card strategy has its advantages and disadvantages, although how many credit cards we have often happens without much thought or planning, occurring gradually over time.

In the 70 years since first introduced, credit cards have become a widely-accepted part of modern financial life. The credit decisions you make now can affect you for a short while — or for decades.

how many credit cards should I have

How many credit cards does the average american have?

average number of credit cards in us
Source: Experian Q2 2019 data

According to Experian, one of the three main consumer credit reporting agencies, over 60% of Americans have credit cards, with the average credit card balance topping $6,000. Other sources put the percentage higher.

Experian also reports the average number of credit cards at 4. Statistics vary from other sources, depending on the methodology of the survey and whether retail cards are grouped with common cards like Visa, Mastercard, and Discover.

Those with higher credit scores have a higher average of 7 credit cards, including some closed accounts, with part of the increased number likely due to a longer credit history.

Averages can be deceiving, though, and the number of credit cards people have can differ greatly from one household to the next and from one generation to the next.

For example, notice the difference in credit usage by generation as reported in Experian’s 2018 annual State of Credit Study.

The Silent Generation (born 1925 to 1945)

Carries an average balance of $4,613 with 3 credit cards and a balance of $1,354 with 2.3 retail cards.

Baby Boomers (born 1946 to 1964)

Have an average credit card balance of $7,550 with 3.5 credit cards and a balance of $1,931 with 2.7 retail cards. In total, Boomers have the highest average combined number of credit cards, including retail cards.

Generation X (born 1965 to 1976)

Have the highest total balance of $7,750 with 3.2 credit cards and $2,122 with 2.6 retail cards.

Generation Y (born 1977 to 1995)

Begin to show a reduction in the number of cards and total balances. Gen Y carries an average balance of $4,315 with 2.5 credit cards and $1,626 with 2 retail cards.

Generation Z (born 1996 or later)

Has the lowest number of credit cards and the lowest average balances. Gen Z carries an average balance of $2,047 with only 1.4 credit cards and a retail card balance of $770 with 1.5 retail cards.

Interestingly, the average VantageScore, a credit score similar to a FICO score, increases consistently by age and generation, with the Generation Z scoring 634 and the Silent Generation scoring 729.

Higher scores generally correspond to more credit availability and higher credit lines. Any study of the average number of credit cards needs to consider age groups due to dramatic difference in usage and also needs to include retail cards.

While retail cards often serve a more limited function than credit cards, they are still revolving balances and have similar financial effects to credit cards.

Also, over 40% of those who have credit cards don’t carry balances, which gives a new perspective to average balances, indicating the balances for some credit card holders are much higher than average.

How many credit cards should you own?

wallet full with cards
copyright: NeilHarkins / bigstock

Generally speaking, less is more when it comes to credit cards. However, it isn’t always that simple. Often credit cards can come with a unique set of benefits that may make it worthwhile to keep room in your wallet for one more card.

Other considerations, like credit utilization, can play a role as well. For example, if you have one credit card with a $700 balance and a $1,000 credit line, your credit utilization is at 70% and having just one card may be hurting your credit score.

If that same balance was split between two cards each with a $1,000 credit line, your credit utilization would fall to a more favorable 35%, boosting your credit score.

In most cases, having at least 2 credit cards gives you more flexibility, better emergency preparedness, and provides the ability to manage your credit utilization percentage more effectively.

Every household should probably have at least one credit card or a prepaid card that can be used for online purchases or in-store purchases.

In the event of a data breach or a stolen credit card number, a credit card or prepaid card is a safer alternative to debit cards, which can put the money in your checking account at risk.

Your individual situation and financial goals can also play a role in how many cards you should have and the type of cards from which you might benefit.

  • No credit history: Historically, retail cards were the easiest type of credit card to get for people with no credit history. Now, student credit cards and secured credit cards can play a similar role and help to establish a credit history.
  • Bad credit: Secured credit cards are also an option for those with bad credit and offer the opportunity to rebuild credit scores. A number of credit card providers also offer unsecured cards with low credit lines that can help rebuild credit with responsible use.
  • Manage debt: Balance transfer credit cards can be an effective way to consolidate credit card debt or other types of high-interest debt by offering low or no interest on transferred balances for a certain amount of time, typically between 6 to 21 months.
  • Earn rewards: Used tactically, rewards credit cards can be a great way to earn free points that can be redeemed for flights, travel, purchases, and more.
  • Major purchases: You might choose to designate one card for major purchases. Often this strategy can be used with a lower interest credit card if you expect to carry a balance or with a rewards card, in which case larger purchases may earn more points. Retail cards are often used for certain types of purchases, like auto repairs, and may even offer an interest-free period if the balance is paid within a certain amount of time.
  • Business: If your business is incorporated, it’s wise to establish separate credit in your business name. Commingling funds, personal and business, can lead to tax issues or legal risk. However, for unincorporated sole proprietors, freelancers, or home-based businesses, it’s also best to separate business purchases for tax reasons and use a separate credit card for business-related expenses.
  • Retirement: A number of credit cards address the needs and interests of seniors, including travel rewards cards and cash back cards, the latter of which may return up to 2% in cash rewards. Other cards may pay up to 5% back on certain types of purchases, like fuel purchases. Typically, balances for retired people are lower and the number of credit cards begins to decline but the types of cards retirees carry may differ.

What are the benefits of having fewer credit cards?

man holding 3 cards
copyright: Otvalo / bigstock

When deciding how many credit cards you should have, it’s useful to think of credit as a tool — and to consider the financial risk of using this particular tool.

Having fewer credit cards can mean you’ll have less risk, with the risk coming in two forms: long term interest expense and the risk of building debt that can become unpayable.

If you have 5 credit cards, each with a credit line of $5,000, the potential credit card debt you can build is $25,000.

While most people won’t max out every credit card, it does happen frequently and life changes, like the loss of a job or medical expenses, can make credit cards a first alternative when the bills need to be paid.

  • Less temptation to spend: Often, spending done with credit cards doesn’t feel like spending cash. The reality of how much money was spent doesn’t set in until later as the balance begins to grow and the debt becomes more difficult to service each month.
  • Easier to manage debt: Having more credit cards makes it easier to build a larger amount of debt, a debt that can be difficult to escape if the balances grow to the point where you can only afford to make minimum payments. Having fewer cards can help keep debt more manageable.
  • Easy to manage payments: If you have 7 or 8 credit cards, you may be making 7 or 8 payments each month. For many people, this can quickly become overwhelming and can increase the chances that a payment will be missed.
  • Fewer fees: Some credit cards charge an annual fee. Having fewer cards can mean a lower overall cost of credit for some households.
  • Access to additional credit: Having fewer credit cards can make the process of opening new credit easier, allowing you to build a credit card strategy that benefits you, like including a rewards or a cash back card.

What are the benefits of having more credit cards?

a stack of credit cards
copyright: dig13 / bigstock

Having more credit cards isn’t always a bad thing. Cards can play different roles in an overall financial strategy, providing more flexibility, rewards points, segmented purchasing, or even helping to boost your credit score if handled wisely.

  • Additional credit for emergencies: We can’t always predict when will need money and the timing of an emergency may be such that you find yourself low on savings when the emergency hits.
  • Different cards for different types of purchases: In many cases, you may wish to segregate certain types of purchases, like if you are using a credit card for business related purchases or you want to track purchases in a certain spending category.
  • Increase rewards: Cards that earn rewards or cash back are one of the most common reasons people choose to carry more credit cards. Used responsibly, cash back and rewards cards can reduce your overall expenses or even pay for the vacation you’ve been planning.
  • Boost your credit score: Having additional credit cards can actually help your credit score — if used responsibly. An important element in your credit score is the utilization ratio for your credit cards, which measures the percentage of your revolving credit lines that you’ve used. If you have one or two credit cards, it can be more challenging to keep your overall credit utilization low. Having more credit cards can make it easier to distribute purchases and keep overall credit utilization lower. Additionally, the average age of your credit plays a role in your credit score, providing an incentive to keep those old credit cards around, even if you don’t use them anymore.
  • Safe access to funds: Credit card fraud continues to be a growing problem and having only one credit card can put you at risk. If your card number is stolen, the remaining credit may be used by fraudulent purchases, making the credit unavailable to you. Once the card number theft is discovered, you or your bank will move to freeze the account, again restricting access to funds. Now, imagine if this happened while traveling or if your car broke down far from home. Having multiple credit cards can bring safety by providing additional options.

Is it bad to have multiple credit cards?

young man holding many cards
copyright: AndreyPopov / bigstock

Keeping multiple credit cards comes with its pros and cons. The advantages discussed above should be balanced with the risks of having multiple credit cards. Overspending is probably the largest risk of having multiple credit cards.

No one forces us to make impulse purchases but they tend to happen anyway in many households and the cumulative cost an interest expense isn’t always immediately obvious.

Credit card balances can creep up over time or spike suddenly due to a large purchase or an unexpected emergency. As balances grow, the debt can become more difficult to service, possibly putting your financial future at risk.

In 2007, total revolving consumer debt first topped $1 trillion.

The following financial crisis and recession saw revolving debt drop below $1 trillion, but by 2017 previous consumer debt records had again been exceeded and still continue to grow.

As the amount of credit card balances increase or as the number of cards increases, you may find that you can only afford to make the minimum payments, which can make purchases much more costly and add years to the debt payoff.

More credit cards also means more bills arriving in the mailbox or your email inbox. As the number of credit cards increases, this can quickly become overwhelming, increasing the risk of a late payment which can damage your credit score for years to come.

Annual fees are another consideration. It’s common for some types of credit cards, like rewards cards, to charge an annual fee. Typically, there are also no-fee options available but if you have multiple credit cards that charge an annual fee, the costs can add up quickly.

Can too many credit cards hurt your credit score?

Credit cards can affect your credit score in several ways, some of which are helpful and some of which are harmful to your credit score.

You’ll find the way you manage credit and your payment history have a larger effect than the number of cards you have.

  • Inquiries: When you apply for new credit, the credit card issuer performs a hard pull or a hard inquiry on your credit report, which can temporarily lower your credit score. Several inquiries within a short amount of time can have a larger effect.
  • Average age of credit: One of the measurements used in your credit score examines the average age of your credit. Opening new credit card accounts lowers the average age of credit accounts and can hurt your credit score.
  • Balance growth: One of the biggest risks of owning multiple credit cards is the risk that you might use them. Generation X consumers, for example, have an average of nearly $10,000 in revolving credit balances, including credit cards and retail cards. With a $200 minimum monthly payment and an average interest rate of 18%, that $10,000 balance will take 94 months to pay off (8 years) and will cost nearly $9,000 in interest. The amount of interest you pay does not affect your credit score but as balances grow, there’s a greater likelihood of a late payment or even a default, both of which can affect your credit score for up to 7 years. Having fewer credit cards could help reduce the temptation to spend, thereby reducing financial risk as well.

Credit cards can be a lifeline in emergencies

Averages and broad trends are useful measurements when honing a credit strategy as part of a larger financial strategy.

However, within the averages and trends are unique stories that the numbers don’t communicate well, cases of households that found themselves in a difficult financial position due to debt.

Credit cards can also be a lifeline in emergencies and can even be profitable if you choose to include rewards cards or cash back cards in your wallet.

Used prudently and with caution, credit cards can be a benefit — and you’ll be safer by having more than one. Two credit cards is an ideal minimum for most households, but there are several situations in which it makes sense to expand to more.

If you choose to add new credit cards, think twice about cancelling your older cards. The average length of credit affects your credit score and those old unused cards are giving your credit score a boost.

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